Covad Joins CENX Carrier Ethernet Exchange

By Paula Bernier, Executive Editor, IP Communications Magazines

Covad (News - Alert), which on March 31 announced plans to buy MegaPath Inc., is one of the largest managed service local exchange carriers in the nation. Covad says its Ethernet services address more than 10 million businesses in 240 metropolitan statistical areas.

“Connecting with CENX will broaden Covad’s wholesale distribution channel and make it easier for other carriers to purchase and sell our Ethernet services without compromising our service differentiation,” says Jeff Brown, vice president of Covad Carrier Services. “Covad’s participation in CENX’s Carrier Ethernet exchange demonstrates our commitment to expanding the distribution of our Ethernet services. Key factors in our decision to work with CENX were their expertise, ability to provide contiguous support for QoS applications, and their integrated business and technical services.”

CENX’s Los Angeles exchange will provide carriers access to Covad’s Ethernet over copper services, which range in speed from 3mbps to 20mbps. The partners expect to add more exchange locations nationwide in the future.

As reported in the January issue of INTERNET TELEPHONYmagazine, a monthly publication owned by TMCnet parent TMC (News - Alert), CENX is a relatively new company run by Nan Chen that has launched a handful of new carrier Ethernet exchanges. In addition to being the president and CEO of CENX, Chen is well known for his position as president and board director of the Metro Ethernet Forum (News - Alert). In fact, it was the MEF that suggested the need for an independently-owned carrier Ethernet exchange such as the ones CENX now delivers within the large carrier hotels in Chicago, Los Angeles and New York.

Chen says that when the MEF (News - Alert) defined carrier Ethernet about five years ago, it understood that interconnect would be a key challenge to enable the service to become widespread. He explains that interconnect is especially challenging with carrier Ethernet given its range of speeds, and its flexibility to support various SLAs and levels of delay, jitter and other performance parameters. As a result, the forum created a committee to look at interconnect issues, he says, and that committee decided the best way to address carrier Ethernet interconnect was to form an independent company.

So that’s exactly what Chen, and some of the other founding MEF officers, who still work at the MEF, did. But while CENX has some management crossover with the MEF, and the exchange is fully aligned with the MEF strategy and mission, Chen emphasizes that it is an independent company funded by private investors.

CENX Marketplace is a portal that shows members what services, including their speeds and other performance parameters, are available. Chen says in some cases CENX will do translation mapping between different tags or classes of service, but he wouldn’t elaborate on the details on that front.

Buyers of CENX member services are charged on a per connection basis, with CENX receiving a cut of each transaction. All connections to the CENX exchange -- which are at 350 E. Cermak and 427 Lasalle in Chicago, 1 Wilshire in Los Angeles, and 60 Hudson in New York – are fiber based at either 1gigE or 10gigE, and can be in protected or unprotected mode, says Chen.

For buyers, Chen says, the CENX can help increase revenues by 90 percent or more, realize up to 55 percent on the cost of sales and up to 95 percent in new service startup costs. Sellers, he adds, will be able to see 50 to 100 percent increased revenue by leveraging their existing footprints at minimal cost.

“For sellers this is an amazingly revenue rich opportunity,” adds Chen, noting that if a seller has 1,000 lit buildings in its footprint and uses CENX to sell just one additional connection to each of those buildings, it could see a $20 million annual increase in revenue.

The worldwide Ethernet services market was $22 billion in 2008, but it is positioned to increase significantly based on this new interconnection capability, says analyst Michael Howard of Infonetics Research (News - Alert).

“I believe the ability for service providers to quickly and economically interconnect with their peers could add as much as $4.7 billion in 2013 in global Ethernet services revenues to help reach almost $39 billion total in that year,” Howard says.

Edited by Michael Dinan

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